ePlus has had an impressive run over the past six months as its shares have beaten the S&P 500 by 20.4%. The stock now trades at $87.65, marking a 34% gain. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy ePlus, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.
Why Do We Think ePlus Will Underperform?
Despite the momentum, we're sitting this one out for now. Here are three reasons we avoid PLUS and a stock we'd rather own.
1. Revenue Growth Flatlining
We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. ePlus’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect ePlus’s revenue to rise by 2.3%. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.
3. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for ePlus, its EPS declined by 5.5% annually over the last two years while its revenue was flat. This tells us the company struggled to adjust to choppy demand.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of ePlus, we’ll be cheering from the sidelines. With its shares outperforming the market lately, the stock trades at 19× forward P/E (or $87.65 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at the most dominant software business in the world.
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